A lot has happened since the last post in which a MS analyst claim that the bear market has ended. Yes indeed it is just beginning. Let's summarized some points
- Election rallies ended with 800 points drops the next two days
- China to spend almost $600B in stimulus to their own infrastructure
- Paulson changed his mind to use TARP money to help consumer credit. Spend baby spend!
- Use trade deficit felt to $56.5B, China trading surplus hit another record.
- Unemployment number shoot over the roof. Continued claims are now at 3.897 million, the highest level since 1983.
So what is next, gov is reacting but not being proactive in solving problem. Buy toxic security "seem" to be such a great idea and now it is totally abandon because the economy's health has deteriorate significantly. Fundamentally, it is as bad as a month ago, only worst because of what the gov did. So, what do I see in the horizon:
- Retailers get clobbered this xmas, regardless of what the gov might do
- A consistent drop of appetite for US treasuries, rate has to increase up to 8% (now at 3.7%)
- Pension fund is smacked with a $5B lost in US treasuries holding.
- The next bubbles! the BOND bubble - corporate, tax-exempt state, city and gov bonds
- Food crisis!
- Frozen international trades.
- Hyper inflation
Are the gov addressing any of those problems right now. In fact, they are making them worst for when it might occur. Tons of US bonds are being sold and money being printed. Again, they are only reacting and chasing after a problem. Paulson definitely earned his PHD (Permanent Head Damaged)
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